Class action lawsuits allow large groups of plaintiffs to bring their claims together in a single lawsuit. In the realm of employment law, employees may bring class-action suits for claims of systemic harassment, discrimination or unequal pay. While class actions are costly for employers, they offer several advantages for employees, including the fact that filing a class action tolls the statute of limitations — in other words, it pauses the clock and delays the deadline by which a person has to file a claim.
In American Pipe & Construction Co. v. Utah, 414 U.S. 538, 544, 552-53 (1974), the Supreme Court concluded that a timely-filed complaint seeking relief on behalf of a class of plaintiffs suspends the running of the statute of limitations for all potential class members. The result is that, if the class certification is denied, all members of the would-be class can still bring claims without being barred by the statute of limitations.
In a recent case, the Supreme Court addressed whether filing a class action tolls the statute of limitations for the filing of additional class actions; the Supreme Court held that it does not.
On June 21, 2018, the Supreme Court issued its opinion in China Agrictech, Inc. v. Resh et al., holding that the filing of a class action only tolls the statute of limitations for individual claims and not for subsequent class actions. In China Agritech, purchasers of the company’s stock attempted to bring two successive class actions after disclosure of fraudulent conduct by the company caused its stock price to drop. Both class actions were brought on behalf of purchasers of China Agritech’s common stock and alleged essentially identical violations of the Securities Exchange Act. The court denied both class certifications. The third class of stockholders, led by Michael Resh, attempted to file a class action. The reviewing district court held that the earlier class actions had not tolled the statute of limitations, and the third class action was, therefore, untimely. Resh appealed the decision to the Ninth Circuit Court of Appeals, which held that the earlier class actions had tolled the statute of limitations under the Supreme Court’s decision in American Pipe.
The Supreme Court ultimately held that “American Pipe does not permit maintenance of a follow-on class action past the expiration of the statute of limitations.” In reaching its decision, the Supreme Court focused on “the efficiency and economy of litigation.” One of the purposes of class actions is efficiency because many claims are condensed into one case. That is defeated, the Supreme Court held, if plaintiffs are allowed to file successive class actions. The Court distinguished the tolling of the statute of limitations for individual claims stating, “economy of litigation favors delaying those claims until after a class-certification denial. If class certification is granted, the claims will proceed as a class and there would be no need for the assertion of any claim individually.”
What this means is that employees will have fewer opportunities to file class-action suits. This is a positive development for employers because class actions can be costly, difficult to navigate, and may limit your strategies for resolving the claims.
The information provided above is created by the attorney in the Labor and Employment Practice Group at Friday, Eldredge & Clark, LLP. This is not a substitute for legal advice and should be considered for general guidance only. For more information or if you have further questions, please contact one of our labor and Employment Attorneys.